Canada to tell G20 austerity and growth both possible

June 11, 2012|Reuters

By Randall Palmer

MONTREAL, June 11 (Reuters) - Canadian Prime MinisterStephen Harper will preach the benefits of austerity to worldleaders when they gather in Mexico next week, arguing that tightbudgets and healthy economic growth are both possible.

In a speech on Monday, Harper came down firmly on the sideof Germany, which has emphasized the need for fiscal disciplineas opposed to economic stimulus measures.

But as he seeks to gain influence ahead of the Ju ne 18-19summit of the Group of 20 advanced and emerging nations, heframed the austerity-versus-growth debate as a "false choice".

"This will be Canada's message at the G20 summit: economicgrowth and fiscal discipline are not mutually exclusive; they gohand in hand," Harper said in the prepared text of his speech toa business audience in Montreal.

There is a growing push in the euro zone, led by newlyelected French President Francois Hollande, to do more tostimulate growth and not just focus on reducing deficits. Harpermet with Hollande in Paris last week.

Germany, the European Union's paymaster, has taken a hardline in favor of tough fiscal targets over the past severalyears, but it has recently softened its tone and agreed to allowSpain more time to cut its deficit as Madrid battles a deepbanking crisis.

In the United States, President Barack Obama talks about theneed to stimulate the faltering economy but has few options dueto opposition from the Republic majority in the House ofRepresentatives.

Harper said his Conservative government's approach should bea model for the rest of the world, portraying it as a balancebetween fiscal discipline and growth-boosting measures such asfree trade agreements and changes to employment insurance,pensions and immigration policy.

"The Canadian approach is what the world needs," he said.

Canada has a small fiscal deficit of about 1.5 percent ofgross domestic product, and plans to balance its budget by the2015-16 fiscal year.

Harper has bluntly refused to contribute additional money tothe International Monetary Fund to cope with Europe's debtcrisis, saying European countries are rich enough to handle theproblem.

On Monday, he applauded the euro zone's agreement to lendSpain up to 100 billion euros ($125 billion) for its troubledbanks.

"I am encouraged to hear of the agreement concludedamong members of the euro zone to ensure the stabilityof the Spanish banking system," he said. "This is the type ofmeasure that Canada favors."